Case study

Union Carbide Corporation and Bhopal On December 3, 1984,tragedy unfolded at the Union Carbide pesticide plant in Bhopal, India. Water en- tered a large tank where a volatile chemical was stored, starting a violent reaction, Rapidly, a se- quence of safety procedures and devices.failed, Fugi- tive vapors sailed over plant boundaries, forming a letha: cloud that moved with the south wind, envel- oping slum dwellings, searing lungs and eyes, as- phyxiating fated souls, scarring the unlucky.

Bhopal is the worst sudden industrial accident ever in terms of human life lost. Death and injury es- , timates vary widely: The official death toll set forth by the Indian government for that night is 5,,295,with an additional 527,894 serious injuries. Greenpeace has put the death toll at 16,000.1

The incredible event galvanized industry critics. "Like Auschwitz and Hiroshima," wrote one, "the catastrophe at Bhopal is a manifestation of something fundamentally wrong in our stewardship of the earth. "2 Union ~1itide was debilitated and slowly declined as a company after the incident. The gov- ernment: of India earn€d mixed reviews for its response. The chemical industry changed, but ac- cording to some, not €Ilough. And the gas victims endure a contmumg struggle ~ get compensation and medical care.3

UNION CARBIDE IN INDIA Union Carbide established an Indian subsidiary named Union Carbide ::ndia Ltd. (VeIL),in 1934. At fust the company owrifki a 60 percent majority irrteles-t. but over the years this was reduced iD50.9 per- cent, Shares in the ownership of the oilier ~91 per- cent traded OZi. the Bombay Stock Excllange. This ownership scheme W2.S signHicant because although UCIL operated with a great deal of autonomy, it gave the appearance that Union Carbide was in con- trol of its operations, By itself, Uen. was one of In- dia's lazgest firms, In 1984, the year of the incident, it

I -Has the World Forgotten Bhopalr The Lancet. Oecember 2, 2000, P. 1863. 2 i)avid Wei:. Th~ Bhopal Syndrome (San Francisco: Sierra Club Books, 1987), p. xii. 3 Rama lakshmi, - Jus".ice for Bhopal Victims, - The £conomic -mes, February 18, 2011.

had 14 plants and 9,000 employees, including 500 at Bhopal. Most of its revenues came from selling Eveready batteries,

Union Carbide decided to build a pesticide plant at Bhopal m 1969. The plant formulated pesticides from chemical ingredients imported to the site, At that time, there was a growing demand in India and throughout Asia for pesticides because of the "gree:-, revolution," a type of planned agriculture that re- quires intensive use of pesticides and fertilizers on special strains of food crops such as wheat, rice, and com. Although pesticides may be misused and pose some nsk, they also have great social value. Without pesticides, damage to crops, losses in food. storage, and toxic mold growth in food supplies would cause much loss of life from starvation and food poisoning, especially in countries such as India. Exhibit 1 shows a Union Carbide advertisement from the 19605 that describes the company's activi- ties in India.

The Bhopal plant would supply these pesticides and serve a market anticipated to expand rapidly. The plant's location in Bhopal was encouraged by tax incentives from the city and the surrounding state of Madhya Pradesh. After a few years, how- ever, the Indian government pressured VeIL to stop importing chemical ingredients. The company then proposed to manufacture methyl isocyanate (MIC) at the plant rather than ship it in from Carbide facilities outside the country. This was a fateful decision.

Methyl isocyanate, ~O, is a colorless, odor- less liquid. Its presence can be detected by tearing and t[,e bummg sensation it causes in the eyes and noses of exposed individuals. At the Bhopal plant it was used as an intermediate chemical in pesticide manufacture. It was not me final product; rather, MIe molecules we..ooecreated, then pumped into a vessel where they reacted with other chemicals. The reaction created unique molecules with qualities that disrupted insect nervous systems, causing convul- sions and death. The plant turned out two similar pesticides marketed under the names Sevin and Temik..

In1975 UOL received a permit from the Ministry of Industry in New Delhi to build an MIC produc- tion unit at the Bhopal plant. Two months before the

EXHIBIT 1 Union CarbIde Adver&ement Tnisad appeared irtFortune ~in April 1962.

So!m:e: Court,esy ofUnion CaJb!de COrporation.

Cnapter 11 Multinational Coroorations 385

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issuance of this permit, the city of Bhopal had en- acted a development plan requiring dangerous in- dustries to relocate in an industria] zone 15 miles away. Pursuant to the plan, M. N. Buch, the Bhopal

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mercia1 use. For reasons that are unclear, his effort f~ed, and Ouch was soon transferred to forestry du- ties elsewhere.

The MIC unit was based on a process design _ .......... ..I.. A hv Tlninn Carbide's engineers in the

The design required storage of we in big tanks. A~-.alternative used at most other pesticide plants would have been to produce small amounts of MIC only as they were consumed in pesticide produc- tion. The decision to use large storage tanks was based on an optimistic projection that pesticide sales would grow dramatically. Since an Indian law, the Foreign Exchange Regulation Act of 1973, re- quires foreign multinationals to share technology and use Indian resources, detailed design work was done by an Indian subsidiary of a British firm. Local labor using Indian equipment and materials built the unit.

In 1980 the MlC unit began operation under UCIl's management. During the five years of design and construction, densely populated shantytowns sprang up nearby, inhabited. mainly by impover- ished, unemployed people who had left rural areas seeking their fortunes in the city. A childlike faith that the facility was a benevolent presence tuming out miraculous substances to make plants grow was widespread among. them.

In fact, when the MIC unit came on line the plant began to pose higher risk to its neighbo~; it now made the basic chemicals USM in pesticides rather than using shipped-in ~gredients. One step in the manufacture of MIC, for example, ctelltes phosgene, the lethal "mustard gas" used in World War I.The benighted crowd by the plant abided unaware.

In 1981 a phosgene leak killed one worker, and a crusading Indian journalist wrote articles about dan- gers to the population. No one acted. A year later, a second phosgene leak forced temporary evacuation of some su."l'OUllding neighborhoods. Worker safety and er.vironmental inspections of. the plant were done by the state Department of Labour, an agency with only 15 factory inspectors to cOver 8,000 plants and a record of lax enforcement 4 Oversight was not vigorous.

Meanwhile, the Indian economy had turned down, and stiff competition from other pesticide firms marketing new, less expensive products re- duced demand for Sevin and Temik. As revenues fell, so did the plant's budget, and it was necessary to de- fer some mai,l'\terumce, lessen the rigor of training, and Jay oli workers. By the time of the incident, the

~ Sheifa Jasanoff, "Managing India's EnVironment, w Environment, October 1986, p. 33.

MJ[C unit operated wifr, six workers per shift, half the number anticipated by Its designers,

UNION CARBIDE'S RELATIONSHIP WITH THE BHOPAL PLANT What was the organizational relationship of Union Carbide Corporation in the United States to its sub- sidiary, Union Carbide India Ltd., and ultimately to the Bhopal plant? How much direction and control did the corporate parent half a world away in Danbury, Cor.necticut, exercise over the facility?

The Bhopal plant fit into the Union Carbide man- agement hierarchy as shown inthe chart inExhIbit 2. Although Carbide employees frorr the United States managed the plant in its early years, in 1982, under pressure from the government, it was turned over to Indian managers. The experience of colonial rule in India created a strong political need for leaders to put on shows of st!ength with foreign investors. Indians felt a burning desire to avoid any appear- ance of subjugation and demanded seH-sufficiency. This is what had led to passage of the law requiring foreign investors to use Indian firms and workers incertain ways-and to put pressure on. Union Car- bide to tum the plant completely over to its Indian subsidiary. .

The Bhopal plant was but one of 500 facilities in 34 countries in the Union Carbide Corporation universe. There was no regular or direct reporting relationship between it and Union Carbide's head- quarters in Connecticut. At the request of UCIL, employees of Union Carbide had gone to India twice to perform safety inspections on the plant. Other than those occasions, managers in the United States had received information or reporting abdtit the plant only infrequently and irregularly when major changes or capital expenditures were re- quested. Thus, the Bhopal plant was run with near total independence from the American corporation. In litigation to determine where victims' lawsuits should be tried, a U.S. court described its autonomy in these words:

[Union CarbideCorporation's} participation [in the • design and construction of the plant] was limited and its involvement in plant operations U!rminated long before the accident ..• [It] was constructed and managed by lndians inlIldia. No Americans were

EXHIBIT 2 Union CarbJde's Organization Stra~6 REhtdtotha Bi1i~alPlant

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employed at the pla..'lt at the time of the accident In the five years from 1980 to 1984, although mo~ than 1,(100indians were employed at the plant, only one American was emp~oyedthere and he left in 1982. No Americans ~ the plant for more than one year prior tO;be accident, and during the 5-year pedod before the acdd.ent the communicatlol'ls be- tween the plant and the United Stales were almost nanex!stent.'

Thus, the Bhopal plant was run by UCIL with near total independence £rom the .Ameri.can corpora- tion. Despite this, shortly after the gas leak Otairman Wan-en M Anderson said that Carbide accepted "moral raponslbillty" for the tragedy.

5 In re Union earbicJe Crxporation Gas Plant Disaster at

Chapter 1.1 Murcinat;onal Corporations 387

THE GAS LEAK On the eve of the disaster, tank 610, one of three stor- age tanks in the MIC unit, sat filled with 11,290 gal- lons of MIC. The tmk, having a capacity of 15,000 gallons, was a partly purled, stainless-steel, pressu- rized vessel. Its purpose was to take in MIC made elsewhere in the plant and hold it for some rime un- til it was sent to the pesticide production area through a transfer pipe, there to be converted into Sevin or Thmik.

At about 9:30 p.m. a supervisor ordered an opera- tor, R Kha:n, to unclog four filter valves near the MlC production area by washing them out with wa- ter. Khan connected a water hose to the piping above the clogged valves but neglected to insert a slip

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------ -_ into adja:::ent pipes. Khan's omission, if it occurred, would have violated established procedure.

Because of either this careless washing method or the introduction of water elsewhere, 120 to 240 gal- lons of water entered tank 610, starting a powerful exothermic (heat building) reaction. At first, opera- tors were unaware of the danger, and for tWO hours pressure in the tank rose unnoticed. At 10:20 p.m. they logged tank pressure at 2 pounds per square inch (ppsi). At 1::30 p.m. a new operator in the MIC control room noticed that the pressure was 10 ppsi, but he was unconcerned because this was within tol- erable limits, gauges were often wrong, and he had not read the log to learn that the pressure was rrow five times what it had been an hour earlier.

Unfortunately, refrigeration units that cooled the tanks had been shut down for five months to save electricity costs. Had they been running, as the MIC processing manual required, the heat rise from reac- tion with the water might have taken place over days instead of hours.

As pressure built, leaks developed. Soon workers sensed me presence of MIC. Their eyes watered. At 11:45 p.rn. someone spotted a small, yellowish drip from overhead piping. The supervisor suggested fixing the leak after the regular 12:15am. tea break. At 12:40 the rea break ended. By now the control room gauge showed the pressure in tank 610 was 40 ppsi Ina short time it rose to 55 ppsi, the top of the scale. A glance at the rank temperature gauge brought more bad news. The MIC was 77 degrees Fahrenheit, 36 degrees higher than the specified safety limit and hot enough to vaporize. Startled by readings on the gauges, the control room operator ran out to tank 610. He felt radiating heat and heard its concrete cover cracking. Within seconds, a pressure-release valve opened and a white cloud of deadly MlC va- por shot into the atmosphere with a high-decibel screech.

Back in the control room, operators turned a switch to activate the vent gas scrubber, a safety de- vice designed to neutralize escaping toxic gases by circulating them through caustic soda. Itwas down for maintenance and inoperable. Even if it had been on line, it was too small to handle the explosive vol- ume cf MIC shooting from the tank. A flare tower built to bum off toxic gasas before they reached the atmosphere was also off line; it had been dissnantled for maintenance and an elbow joint was missi.~" An- other emergency measure, transferring MIC from

tank 610 ro one of the other storage tanks, was fore- closed because both were too full. This situation also violated the processing manual, which called for leaving one tank empty as a safeguard.

At about 1:00a.m. an operator triggered an alarm to warn workers of danger. :be plant superintend- ent, entering the control room, ordered a water spraying device be directed on the venting gas, but this last-resort measure had little effect, Now most workers ran in panic, ignoring four emergency buses they were supposed to drive through the surround- ing area to evacuate residents. Two intrepid opera- tors stayed at the control panel, sharing !:he only available oxygen mask when tae room filled With MIC vapor. Finally, at 2:30, the pressure in tank 610 dropped, the leaking safety valve resealed, and the venting ceased. Roughly 10,000 gallons of MIC, about 90 percent of the tank's contents, was now set- tling over the city.

That night the wind was calm, the temperature about 60°, and the dense chemical mist lingered just above the ground. Animals died. The gas attacked people in the streets and seeped into their bedrooms. Those who panicked and ran into the night air suf- fered higher exposures.

As the poisonous cloud enveloped victims, MIC reacted with water in their eyes. This reaction, like the reaction in tank 610, created heat that burned corneal cells, rendering them opaque. Residents with cloudy, burning eyes staggered about, Many suffered shortness of breath, coughing fits, i..'"lflam- mation of the respiratory tract, and chemical pneu- monia. In the lungs, MIC molecules reacted with ~isture, causing chemical bums. Fluid oozed from seared tissue and pooled, a condition called pu.lnio., nary edema, and its victims literally drowned in their own secretions. Burned lung tissue eventu.aD.y healed, creating scarred areas that diminished breathing capacity. Because MIC is so reactive with water, simply breathing through a wet cloth would have saved many lives. However, people lacked thiS simple knowledge.

UNION CARBIDE REACTS Awakened early in the morning, CEO Warren M. Anderson rushed to Carbide's Danbury, ConnecticUt, headquarters and, learned of the rising death toll. When the extent ofIthe disaster was evident, a senior management committee held an urgent meeting.

decided to send emergency medical supplies, res- oxygen (all Carbide products), ana an

'AUleri1c.andoctor with knowledge of MIC to Bhopal day, Tuesday, December S, Carbide dis-

.Itch{!d arteam of technical experts to examine the on Thursday, Anderson hlmself left for India.

'1f(JIwe'vet.iarner arriving in Bhopal, he Was charged criminal negligence, placed under house arrest,

.00 then asked to leave the country. With worldwide attention focused on Bhopal,

Carbide held daily press conferences. <:IU'1.stnas parties were canceled. Flags at Carbide facilities .Dew at haJf-sBff. All of its nearly 100,000 employees observed a moment of silence for the victims. It gave $1' million to an emergency relief fund and offered to tum its guesthouse in .Bhopal into an orphanage.

MOr.fr.3 later, the company offered another $5 mil- lion, b-.:t the money was refused because Indian poli- ticians trenabJed in fear that they would be seen cooperating with the company. The Indian pub:ic re- viled -anythirl.g associated with Carbide. Later, when the state govemmenr learned that Carbide had set up a training school for the unemployed in Bhopal, it flattened the facility with bulldozers.

CARBIDE FIGHTS LAWSUITS AND A TAKEOVER BID No sooner had the mists cleared than American at- torr~ys arrived in Bhopal seeking litigants for dam- age claims. They walked the streets signing up plamti.ffs. Just four days after the gas leak, the rust sUit was filed in a U.S. cour!j soon cases seeking ~ billion indamages for 200,000 Indians were filed against Carbide.

However, the Indian Parliament passed a law giv- ing the Indian government an exclusive right to .rep- ~ victims. Then India ~l::e United States. Union Carbide offered $350' to settle existing claims (an offer re',ected by the Indian government) and brought a motion to have the cases heard in India. Both Indian and American lawyers claiming to represent victims opposed the motion, lcnowing that wrongful death awards in India were small com- pared with those in the United States. However, in 1986 a federal court ruled that the cases should be heard in India, noting that "to retain the litigation in [the United States] ... would be yet another example

Chapter 11 Mu/tinariona. CorporatIons 389

of imperialism, another situation in which an estab- lished sovereign inflicted its rules, its standards and values on a developing nation."6 'This was a victory for Carbide and a defeat for American lawyers, who could not carry their cases to India in defiance of the government.

In late 1986 the Indian govemment filed a $3.3 billion civil suit against Carbide in an Indian court? The suit alleged that Union Carbide Corporation, in addition to being majority shareholder in Union Carbide India Ltd., had exercised policy control over the establishment and design of the Bhopal plant. The Bhopal plant was defective indesign be- cause its safety standards were lower than similar Carbide plants in the United States. Carbide had consciously permitted Inadequate safety standards to exist. 1h.e suit also alleged that Carbide was con- ducting an "ultrahazardous activity" at the Bhopal plan! and had strict and absolute liability ior com- pensating victims regardless of whether the plant was operating carefully or not.

Carbide countered with the defense that it had a holding company relationship with uen. and never exercised ~ control over the Bhopal plant; it was prohibited from doing so by Indian laws requiring management by Indian nationals. In addition to the civil suit, Carbide's chairman, Warren Anderson, and several UCIL executives were charged with homicide in a Bhopal court. This apparently was a pressure tactic, since no attempt to arrest them was made.

On top of i-.s legal battle, Carhiae had to fight for its independence. in December 1985, GAP Corpora- tion, which had been accumUlating Carbide's shares, made a takeover bid. After a suspenseful monthlong .battle, Carbide fought orr GAF, but only at !he cost of taking on enormous new debt to buy back 55 percent of its OUtStancmg shares. This huge debt had to be reduced because interest payments were crippling. 'So in 1986 Carbide sold $3.5 billion of assets, includ- ing its mosf popular consumer brancis-Eveready batteries, Glad bags, and Prestone antifreeze. It had sacrlficed stable sources of revenue and was now a smaller, weaker company more exposed to cyclical economic trends.

61n re Union Carbide Corporation GasPlant Disaster; 634 F. Supp. 867 (S.D.N.Y. '986). 7 Union of India v. Union Carbide Corp. and Union Carbide India Ltd., Bhopal District Court, No. 1113 (1986).